Pension & Benefits News Pandemic may fuel higher employer health care cost increases in 2021, Willis Towers Watson finds
Tuesday, October 20, 2020

Pandemic may fuel higher employer health care cost increases in 2021, Willis Towers Watson finds

By Pension and Benefits Editorial Staff

While the pandemic drove a significant decrease in the use of health care services in 2020, employer health care benefit costs in 2021 are likely to increase above and beyond non-pandemic projections as care deferred in 2020 is pushed into the future, according to a Willis Towers Watson analysis of medical claims and the potential impact of COVID-19 on care utilization and costs.

Willis Towers Watson studied four potential future patterns of COVID-19 infection and the subsequent impact on the level of care delivered to COVID-19 and non-COVID-19 patients. The analysis found employer health care costs in 2020 will likely come in between 3.3 percent and 8.8 percent lower than originally expected in the absence of the pandemic, as system capacity shifts and a fear of contracting the virus in medical settings continues to drive a significant volume of foregone and deferred care.

In 2021, however, costs are expected to rise again, between 0.5 percent and 5.0 percent above non-pandemic projections due to continued care for COVID-19 patients and delivery of previously deferred non-COVID-19 care. When 2020 and 2021 are combined, the study shows cost reductions of between 2.8 percent and 3.8 percent from non-pandemic levels across the four patterns.

“COVID-19 has played havoc with all previous projections of health care utilization levels,” said Trevis Parson, chief actuary, Willis Towers Watson. “In 2020, we may see a reduction in national health care expenditures on a per capita basis for the first time since 1960. However, this reversal in trend is highly likely to be only temporary, despite the continued uncertainty about the virus, as previously deferred care returns in 2021.”

The analysis noted that the impact of COVID-19 on specific employer plans will differ based on a variety of factors that are geographically sensitive.

“Employers need to pay special attention to the impact of COVID-19 on their health care spend,” says Parson. “The pandemic is driving significant volatility, which demands effective measurement. Broader changes to the health care system are likely to result, which will challenge employers as they look to drive value to employees through their health care plans. Employers will need to understand the rapidly changing health care market landscape and the shifting needs and risk profiles of their workforce.”


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